Rattan furniture being made for export to European markets. Danlao Co., Vientiane Province, Laos.

Retailers are strategically poised to lead the way and mobilize transformational impacts in supply chains.

When a wave of global social movement campaigns in the early 1990s charged retailers with contributing to global deforestation, companies like B&Q realized that sustainability was no longer an option. The UK company – part of the Kingfisher Group – soon recognized that it was not just about reputational risk, but that responsible sourcing of wood products is central to its business model.

“Rather than ask, ‘what is the cost of doing this?’, a better question would be to ask, ‘what is the cost of not doing this,” says Kingfisher’s Sustainability Advisor, Jamie Lawrence.

The focus on deforestation and forest degradation has surged in recent years, not just because of pressure from the civil society but because of heightened customer awareness and the simple recognition by many companies that timber supplies are not endless. Sustainability is not just about saving forests, it’s also about ensuring that companies don’t run out of the very raw materials they need to grow their business.

A new deep-dive report from WWF released today finds that retailers that have made public commitments and have implemented policies to source sustainably produced timber and wood products have seen a number of benefits. 

The amount of wood we take from forests and plantations each year may need to triple by 2050. In a world where competition for land and water is increasing rapidly, protecting forests and using their resources mindfully will be just as important for businesses as for our natural world.

Sustainability is no longer a niche but needs to be the norm.

The economic case

Nearly 60 per cent of the 718 companies in the high deforestation risk sectors — producers, processors, traders, manufacturers, and retailers that have supply chains dependent on palm oil, timber and pulp, soy and/or cattle – have publicly committed to buy and sell “deforestation-free” commodities, according to a recent report by Supply Change.

These commitments are a step in the right direction, but they are not sufficient. Most of the commitments do not cover the full range of sustainability issues related to commodity production, and the majority of the companies are not setting time-bound targets and measuring progress towards them.

Even beyond those who have made public commitments, a large number of companies have yet to buy into the sustainability argument. Cost is often cited as a significant barrier. However, as the growing body of research shows, the rewards that companies gain are worth the investment.

A recent study by the ISEAL Alliance found that companies who have incorporated sustainability standards have seen business benefits related to sales and marketing, followed by operational benefits, including efficiency and risk management.

A new deep-dive report from WWF released today complements these findings and finds that retailers that have made public commitments and have implemented policies to source sustainably produced timber and wood products have seen a number of benefits. As part of our research, 54 retailers from diverse business sectors and geographies completed a survey about their timber sourcing policies, and the costs and benefits they perceived.

Over 80 per cent reported positive impacts on risk management and brand reputation; and over 60 per cent of retailers saw positive impacts on customer satisfaction and stakeholder engagement. More than 70 per cent of retailers claimed sustainability commitments had a positive impact on employee engagement, indicating potential gains from higher employee satisfaction and retention.

In the follow-up interviews with representatives from retailers that have demonstrated long-term commitment to responsible sourcing of forest products, it became clear that these benefits do not come from commitments just on paper. Instead, companies that fully embrace responsible sourcing policies build long-term relationships with trusted suppliers, providing education, technical support, and longer-term contract. In so doing, they are able to guarantee stability and security of supply while reducing the risk of having timber products from illegal, conflict, and controversial sources. This was the case with Migros, one of the largest retailers in Switzerland. The company has set responsible sourcing targets for each buyer regarding Forest Stewardship Council (FSC) certified products, and encourages them to incorporate carbon footprint in their purchasing decisions. This model of top-down target setting and bottom-up decision helps create a culture of sustainability in the entire supply chain.

Similarly, those that said responsible sourcing was good for their brand reputation did not only have their sourcing policy on paper but also used it to engage stakeholder groups to proactively resolve contentious issues. Bunnings, for example, has not only seen supply chain resilience but its responsible sourcing commitment has also helped strengthen its relationship with civil society stakeholders.

In the case of IKEA, around 30 per cent of the wood it sources comes from areas such as South-East Europe, Russia, China and South-East Asia – where there is a higher risk of illegal or irresponsible forestry practices. FSC certification is an important risk management tool for IKEA to help ensure that the wood does not come from illegal or controversial sources in these regions.

These findings reinforce a growing body of research attesting to the business benefits of taking action on sustainability in supply chains. Because the notion of sustainability in forest product sourcing has a longer history and more scrutiny compared to other commodities, the WWF study offers numerous lessons that are applicable to other commodity sectors.

What’s lacking, though, is hard data on the bottom-line impacts. Few companies are measuring this. Moving forward, robust metrics to measure the impact on business performance will be crucial for responsible